Gold miners have had a terrible year so far in the wake of
tumbling gold prices. Although there was a brief period of gains in
July, and then more recently on geopolitical worries, the space
remains in a downward trend (Read:
Gold ETF Slump Continues, Drags Down Mining
Gold miners: A cautious bet?
During the first seven months this year, gold miners were battling,
losing by a pretty wide margin of 40%. While gold miners had high
hopes for the long run of the QE, which could have favored the
situation, data and comments from members of the Fed suggest that
this might not be the case.
However, we have some good news too. Lately, trading in the segment
has been decidedly more bullish, leading many to believe that the
worst might be over for the segment (read:
3 Mining ETFs Finally on the Upswing
While many think that the yellow metal has bottomed out of the
commodity space, what lies ahead is still a surprise to many.
Analysts comment that the current market conditions will force the
industry to rebuild itself, though at a much tepid pace.
Yet even in this environment, the
Market Vectors Gold Miners ETF (
remains the most popular way for investors to play the gold mining
space in basket form. The product is both quite liquid and has a
huge asset base, so it is definitely the preferred choice for most
investors seeking to get in on the segment (Read:
Gold Mining ETF Investing 101
NYSE to Modify Gold Miners Index
However, investors should note that the product will be undergoing
some major changes, thanks to a shift in the holdings for its
underlying index, the NYSE Arca Gold Miners Index.
The index which has major exposure in North America, is going to
add many non-U.S. listed stocks and is not going to allocate to
small companies any more. In fact, companies which have a
market-cap of less than $750 million will exit the benchmark
Moreover, the index is also going to include more American
Depository Receipts (ADRs) and Global Depository Receipt (GDRs).
The change is expected to be effective from Sep 20 this year and
will give more global exposure to the holders of GDX.
More About GDX
Launched in May 2006, GDX is easily one of the most popular and
liquid product. It tracks the NYSE Arca Gold Miners Index and puts
focus on large cap gold miners. The fund charge investors 52bps in
fees annually and has a good average daily trading volume of 26.8
million shares a day (Find more
Materials ETFs here
The product holds 30 securities in its basket and puts a major
focus in North America. The fund is more concentrated in its top 10
holdings, which jointly contribute a share of about 67%. Meanwhile,
the product is quite popular as it has a huge asset base of $5.6
This is an important change for this ultra-popular product, and it
will likely make comparisons between performance before and after
the switch date irrelevant. However, it will help to keep the
holdings of this ETF separate from those in junior gold mining
, and likely even after the switch, GDX will be the most popular,
and arguably best, way for investors to achieve broad exposure to
the space in fund form.
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